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Expert Commentary: How Trump’s Trade War Affects Canadian Oil

Expert Commentary: How Trump’s Trade War Affects Canadian Oil

Trump

Last week, the first salvo of a global trade war was fired: US tariffs on steel and aluminum.

Like the “shot heard round the world,” the American protectionist move has politicians and economists in industrialized nations strategizing with their spreadsheets. From Porsches to prosciutto, every country is scouring trade numbers to see what can be tit for tat in the event of all-out global trench digging.

Canadian industries, on the other side of the bridge from where the shot was fired, have their helmets on. The volley is a prod to put all things we peddle—and to whom we peddle to—into perspective.

Steel, for instance, has much in common with oil, natural gas and petroleum products businesses. Both are products sourced from a plentiful domestic endowment of resources — iron ore and hydrocarbons. Both fight for market share in a fiercely competitive global market. Both have long been vulnerable to the vagaries of government policy. Both are hugely important to their provincial economies, Ontario and Alberta respectively. And both are dominantly exported to the United States.

But that’s where the comparisons end. We sell a lot more barrels of oil than rolls of steel.

Sifting through the eye-rubbing data tables on the Statistics Canada website, exports of “iron, steel and articles thereof” in 2017 were $14.0 billion. About 86 percent of those exports were sold to the United States. Aluminum and articles thereof was $12.6 billion. It’s not clear which product sub-classifications, if any, may be subject to US tariffs. Nor do we know if nuts, bolts, fence posts, and other value-added articles thereof will be included. But let’s assume everything is thrown into the Trumpian blast furnace.

By comparison, exports of Canada’s oil, gas and petroleum products last year—during a period of depressed prices—were almost $107 billion, 91 percent of which went south of the border.

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